The public release of the chargemaster rates, or what Health and Human Services Department Secretary Kathleen Sebelius terms "a key piece of the [healthcare] cost puzzle, is the latest federal effort to "bring more transparency" to the healthcare market as well as "empower consumers, create competition, and help hold down costs. When consumers can easily compare the price of goods and services, producers have strong incentives to keep those prices low. That's how markets work," states Sebelius.
HHS officials note that Medicare—and most private health insurers don't actually pay Swedish Medical Center more than $92,000 for joint replacement. Medicare applies a system of standardized payments based on the DRG. At Swedish the average total Medicare payment for the joint procedure was $22,824.
Sebelius stressed the value of the data to the uninsured and underinsured, who she says are often expected to pay the full chargemaster rate. For elective procedures those consumers can "easily compare average prices" at local hospitals and factor those costs into their decision on where to have a procedure performed.
Exactly why hospital costs have such a wide variance remains a mystery according to Jonathan Blum, the deputy administrator and director for the Center for Medicare at CMS. "Some speculate that the difference is driven by patient health status or the teaching status of the hospital facility or the higher capital costs of some hospitals."
But Blum says there is no relationship. "We cannot see any business reason why for so much variation." He hopes the data release will help community leaders and consumer activists engage stakeholders in a more public discussion of the variations and perhaps help identify the contributing factors.